The Productivity Commission's Tim Maddock and Terry Genet analyse NZ's labour market ahead of an inquiry into technological disruption and the future of work

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By Tim Maddock & Terry Genet of the Productivity Commission

How a country’s labour market performs has a huge bearing on its overall productivity and wellbeing. Over recent decades, New Zealand’s labour market has seen some significant changes, including to the make-up of the workforce, and the nature of work performed. The Productivity Commission has been analysing some of these trends in preparation for its new inquiry on Technological Disruption and the Future of Work.

New Zealand has relatively high labour participation and low unemployment

A high proportion of New Zealanders participate in the workforce compared with other OECD countries. Overall participation in the labour force has increased substantially since the late 1980s.

New Zealand’s unemployment rate currently sits at just over 4%, after peaking in the early 1990s and subsequently declining. Across the country, unemployment rates differ considerably. Higher rates in regions such as Gisborne and Northland have persisted. There are also large disparities between ethnic groups – Māori and Pacific peoples experience much higher levels of unemployment. Young workers and less-educated workers also face higher unemployment. Further analysis is needed to better understand the dynamics between ethnic, regional, education and age disparities in unemployment

Rates of participation among women and older-aged people have increased

Compared to the late 1980s, women, particularly between the ages of 25-34, and people over 60 make up a much greater share of the workforce. Since then, the participation rate for those aged 60-64 has increased by close to 50 percentage points, driven to some extent by the change to the age of eligibility for superannuation in the 1990s.

Migration is a major source of new workers

Because of a surge in immigration, the number of new working-age migrants has, in recent years, been roughly double the number of New Zealand residents turning 15 each year. 43% of immigrants in 2018 arrived using a work visa. High migration levels have been the main driver of the fast growth in the national population. Much of this growth happens in Auckland, where just under half of incoming migrants choose to live, work or study.

The average New Zealand worker is much more qualified than in the past

New Zealanders today are much more likely to complete secondary school and pursue higher forms of education than in the past. Over half of the adult population in 1981 held no qualifications; now more than 80% hold a secondary school qualification or higher. Nearly 30% of the adult population holds a degree or higher, compared to about 7% in 1992.

The nature of jobs has shifted toward services, high-skilled and non-routine jobs…

Between 1989 and 2018, New Zealand saw a large increase in employment in professional, scientific, and technical services, as well as in the health care and social assistance, and construction sectors. In contrast, the share of jobs in manufacturing more than halved from around 23% to 11%.

In terms of specific occupations, the general trend over this period was little growth (or decline) for jobs involving relatively manual or routine tasks (eg, machine operators, clerks, agricultural workers) and large growth for jobs involving non-routine and service-based tasks that tend to require higher-level qualifications (eg, professionals, managers, technicians). It is widely thought that this trend will continue.

… though there is no evidence yet of jobs becoming less secure

Some commentators have talked of the emergence of a gig economy that encompasses more flexible, less secure jobs and more non-standard work arrangements. Yet, to date, there is little data to support this trend. The proportion of jobs that are non-permanent (eg, casual, fixed-term) has remained relatively stable since 2008. Since 2000, there has been no increase in the number of self-employed workers or workers who hold multiple jobs, and a greater share of workers are in full-time jobs relative to part-time jobs, largely because more women have taken up full-time roles.

Rates of job redundancies appear to be low in New Zealand

Rates of job displacement – redundancies due to business closures and structural change – appear to be low by international standards. The best available data from Stats NZ suggests that the percentage of displaced workers, as a share of the total labour force, has been fluctuating around 1.5% since the early 2000s, after peaking in 1992. Displacement rates also seem to differ by region, and are higher among men, older, and less-educated workers. While displacement rates may be low, studies suggest that the negative financial and employment impacts of displacement are on average greater in New Zealand than in other OECD countries.

Growth in labour productivity has lagged behind most other OECD countries

Growth in New Zealand’s labour productivity, measured by the value of goods and services produced per hour of labour, has lagged behind the OECD average since 2000, and has even become negative in recent years. Yet, the average New Zealander works a greater number of hours each year than in many other countries (eg, Australia, United Kingdom and Canada). Together, these two points highlight that while New Zealand is good at ‘working harder’ – adding labour to the economy – it struggles at ‘working smarter’ – raising the value produced from each hour worked.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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12 Comments

Figure 5 is very interesting.
I have long been thinking that having the over 60s group working longer and over 65s effectively double-dipping with pension has had a detrimental effect on youth coming in to the workforce.
Employers can pay older workers peanuts as they pull a pension too, therefore undercutting wages and opportunities for younger people.
Nice to have something more than anecdotal evidence.

In Auckland North Shore I see about 100 visible immigrants for each elderly worker. Of course some of the 65 - 75 year olds look as if they are 50 so my counting could be out. I remain confident that our low wages are imported from the 3rd world not caused by well paid adults retiring, getting superannuation and then concluding they want to do a low paid job.

I've been involved in quite a few of these graphs. The one that still hurts was my 1988 redundancy. I can still feel it so can relate to those comments as well. Have been self-employed for the last 23 years which has also had its ups & downs but survive to tell the tale. Just. Didn't mind working hard but struggled with a 50 hour working week, which we (I) did regularly until recently. Mrs LJM wants to carry on. Good for her.
Looking forward to super later this year. Paid a truck load in, be nice to get some back.

LJM; your voice, having gone through redundancy in those times, is probably something that is vitally needed at a national level when conversations like this are happening. My last two contracts, three and a half years apart, saw the redundancy provisions drop from four weeks paid notice to two. I'd wager my next one has no redundancy provisions at all. I've heard stories of elders who got redundancy payouts so big they were able to buy a house, continue paying a mortgage or use the time they had to finish uncompleted study; now it's basically a notice that you've got two weeks before you need to cap in hand to your bank and that's it. Costs of living are so tight now that many would be one redundancy away from a forced sale of family home, or having to up sticks and leave schools, regions etc just to find other work at short notice. That does not sit well with me in a country like New Zealand.

If you are a you, female, maorit/pacific person, good luck¿ The government should be forcing businesses to hire people based on age, sex and ethnicity not just 'merit' then we can get the equality we all deserve.

Interesting graphs proving what the OECD also says: NZ has a highly skilled workforce. And then both Labour and Nationals tell us we need to import skilled workers because NZ has none. Maybe because our dept of immigration judges chefs, tourist guides, bakers, truck drivers, etc as 'skilled'. Immigration of really high skills is good for immigrant and good for NZ but the mainly low level immigrants we receive are just killing wages, stopping training and reducing incentives to improve productivity (they also come mired with corruption and rorts which are reported almost daily).

This study is interesting but probably the least productive the Productivity Commission has done/is doing.
I struggle to see what direct policies for immediate/short term implementation can come out of the study to lift NZ's productivity.

It doesn't matter anyway because the gubmint won't listen. The Productivity Commission did a report on what a rort our building materials are compared to another remote island economy (Australia). The report explained that building materials are expensive because there is fat in the system - compliance costs and oligopolies (enabled by compliance hoops). Did the govt listen ? No; Pick any building material there are 2-3 big players ripping off kiwis and sheltering behind BRANZ certificates.

The only thing the gubmint did was ban moth balls. Today I found a shirt with moth bites in it. Sir Chon's legacy.
Let's hope the current lot are better.